Japanese Yen Price Action Ideas: USD/JPY, EUR/JPY (Technical Analysis)

By Zain Vawda

JPY Fundamental Overview

The Japanese yen has had a wild ride over the past two weeks, with yen pairs experiencing some price action. Things have been settling down of late, but there is still the potential for further headwinds.

The US dollar is seeing a small rebound this morning, which has helped USD/JPY move away from the psychological hold of 145.00. This comes after significant volatility was seen in the pair yesterday following the downwardly revised jobs data and the release of Fed minutes.

A number of Japanese dates were released in the Asian session to mixed reception. Composite and manufacturing PMI rose a month earlier. The composite print was the largest print since May 2023.

Japanese composite PMI hits highest level since May 2023

Au Jibun Bank of Japan Manufacturing PMI rose to 49.5 in August 2024, from a four-month low of 49.1 the previous month, compared with market forecasts of 49.8, indicating a second straight month of contraction in factory activity, preliminary estimates showed. It also marked the sixth straight month of decline in the manufacturing sector this year as new orders continued to fall, with foreign sales falling at a stronger pace.

Finally, data on business confidence also showed marginal signs of improvement.

The Bank of Japan’s Kazuo Ueda is due to testify before Japan’s parliament on Friday, where lawmakers will scrutinize the central bank’s interest rate hike in July. In addition, local inflation figures are scheduled to be released tomorrow.

The week will conclude at the Jackson Hole Symposium, which brings together central bank leaders from the US and UK. Jerome Powell and Andrew Bailey are expected to make remarks that could fuel volatility and affect USD/JPY and GBP/JPY ahead of the weekend.

Japanese Yen Technical Outlook

USD/JPY

Technically, USD/JPY’s recent price action posted a green daily candle, ending a 3-day losing streak. Although USD/JPY failed to retest the 150.00 level at the end of last week, there is potential for another attempt to reach this psychological threshold.

Today’s daily candle is about to complete a morning star candle pattern from a key support area, theoretically signaling higher prices. However, with upcoming inflation data from Japan, the Jackson Hole symposium and BoJ Governor Ueda’s parliamentary appearance, risks remain significant.

On the upside, resistance is at 146.37, tested earlier today. A break above this could shift focus to last week’s highs at 149.38. Conversely, a breach of 145.00 may pave the way for a retest of the August 5 low at 141.67, although USD/JPY must first navigate support around 143.60.

USD/JPY Daily Chart – August 22, 2024

EUR/JPY

EUR/JPY closely mirrors the USD/JPY chart, a trend that has become more evident in recent months. Yesterday, EUR/JPY formed an inverted hammer and this morning’s short push higher met resistance near yesterday’s highs.

Immediate resistance is at 163.50, with the 200-day moving average just above 164.13. A breach of this level could trigger a 200-pip rally towards the 166.21 handle and 100-day moving average.

On the downside, a move lower from current prices will need to navigate the 162.00 level before bringing the 160.00 psychological handle into focus.

EUR/JPY Daily Chart – August 22, 2024

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